By John Lipsey
As if today’s sluggish economy isn’t challenging enough for today’s C-suites and boardrooms, executives are facing growing unbudgeted cost and risk exposure from an unlikely source: their software vendors. According to the 2012 Software Pricing and Licensing Survey published recently by IDC and Flexera Software, software vendors are availing themselves more frequently of their rights to audit their customers’ software use, and exact “true-up” fees if that use exceeds licensing agreement terms and is found to be “non-compliant.”
According to the survey, the problem can be traced back to organizations’ challenges with tracking and managing software licenses, and aligning software installation and use to ensure compliance with the complex software licensing contracts. Organizations typically have dozens, hundreds or even thousands of software license agreements to which they are legally bound. One third of enterprises surveyed said they are either dissatisfied or very dissatisfied with their current method for managing software licenses and software usage.
And the reasons for that dissatisfaction are clear -- 38% of enterprises indicated that 11% or more of their application spend is associated with applications that are overused, and therefore out of compliance, up from 26% of enterprises one year ago. Moreover, software vendors are using all means necessary to improve their bottom lines and grow revenues, including enforcing their software licensing terms and collecting true-up fees via audits. According to the survey, 64% of enterprises reported that they have been audited over the last 18-24 months. And large enterprises – those greater than $1B in revenue – were significantly more likely to have been audited three times or more in the last 18-24 months. Moreover, 24% of enterprises said their total audit true-up paid over the past year was $1 million or more.
Finally, the survey revealed that the major software vendors – those that typically account for a significant portion of most organizations’ enterprise application spend – are also the most aggressive auditors. Enterprises reported that over the last year, they’ve been audited most frequently by Microsoft (51% of respondents), followed by Oracle (27%), IBM (24%), SAP (22%) and Adobe (19%).
Amy Konary, research vice president - software licensing and provisioning at IDC summed it up this way:
“Software usage that exceeds the negotiated license terms can represent significant lost revenue for software vendors. There are many factors that make license compliance difficult, including license and IT environment complexity, lack of automation, and decentralized IT. IDC expects that vendors will continue to enforce their license agreements with audits, and advises enterprises to pro-actively track and manage usage of their software assets.”
The need for Software License Optimization has never been starker. Organizations face tremendous challenges tracking and managing software licenses and reconciling software use against their software license agreements. If existing license management processes and tools aren’t significantly reducing or eliminating painful software audit true-up costs – organizations must increase their Software Asset Management (SAM) and License Optimization maturity to meet this challenge. Optimizing the software license estate can eliminate or significantly reduce that risk exposure.
Click here to read the full 2012 Software Pricing and Licensing Survey report.